We are often blind to our own environment because of our assumptions, framed by media, insular thinking and our own prejudices. Smart City Consulting's blog – named one of the most intriguing in the U.S. by Pew Partnership for Civic Change – hopes to show how Memphis really is and could be through alternative questions, fresh approaches and new ideas. We hope to open your eyes - and your ears - to a new way of thinking about Memphis. Send ideas and emails to tjones@smartcityconsulting.com.

Sunday, February 12, 2006

The 10 Regions of Tennessee, Part 2: Tax-Sharing

Some major cities, notably Portland, OR, and Minneapolis, have traced much of their competitive success to their multi-county taxation authority. In these places, rather than joint taxing being a divisive force, it is a unifying force that led local governments to work together, rather than see themselves as enemies and competitors.

If such taxing authority here could include the North Mississippi counties of the Memphis MSA, it would be truly revolutionary (it would take the help of the Mississippi Legislature), attracting national attention for its creative thinking on funding public services. Most of all, to the delight of workers living outside of Shelby County, it would take off the table the payroll tax as the preferred funding source for regional services and replace it with multi-county taxing that gives North Mississippi a voice in what the revenues are used for. It’s a much more politically palatable option for non-Shelby Countians.

The existing tax system is hopelessly outdated, because it is set up in a way that presumes that every jurisdiction is self-contained and its interests are walled off from its neighbors. But in the real world, things work altogether differently.

In truth, the entire region is a functioning whole. As we’ve written before, as a result, the activities that produce tax revenues – and the needs for them – have little geographic relevance to the distribution of those taxes. That’s why we’ve advocated more rationality in the current tax system to define once and for all what’s a municipal service – whether we live in Memphis or Millington – and what’s a regional (or county) service, and to put the services on the appropriate tax base. For example, if schools are countywide, all educational costs should be placed on the countywide tax base, that of Shelby County Government, cutting the tax rate of Memphians by a significant amount. Also shifted to the regional tax base are services funded now by the City of Memphis but enjoyed by the entire region -- museums, the zoo and downtown amenities.

What happens when there is no rationality and no imperative for regional cooperation is the competitive attitude that exists here today. Regional economic development officials may repeat all the platitudes about regional cooperation in op-ed pieces printed in The Commercial Appeal, but behind the smiles is a cutthroat competition on all sides that lies at the heart of the relationship that no amount of rhetoric can gloss over.

The consequences of multiple jurisdictions competing over a finite tax base as it does today – such as Collierville’s pursuit of another huge shopping center that is unjustified in the marketplace – ends up as a net loss for the region. It results in zoning of commercial and retail property designed to create optimal taxes, rather than the optimal community, and in the end, it inevitably erodes the overall quality of life for the region.

There is no such thing as winners and losers in such a competition. It is only about “today’s winners,” because such policies eventually will result in shopping centers springing up somewhere else and choking off the one booming in Collierville today. And of course, the biggest loser is the urban center. In the end, it’s the flight of revenues that most devastates Memphis, and in the end, this leads to public policies that see public subsidies like PILOTs as the answer to thwarting more financial loss.

This vicious cycle can be broken with a regional way of pooling taxes, which are then reallocated throughout the area. This helps break the mismatch that exists between the social needs and the taxes to address the needs, it helps to remove the incentives that spur on sprawl and it helps to end the intergovernmental fight for scarce public revenues.

When it comes to tax-sharing arrangements, conventional wisdom should be set aside. In Minneapolis-St. Paul, while the suburbs subsidized the central cities 30 years ago, it reversed later when older suburbs were in decline and needed help.

The Metropolitan Council in the Minneapolis-St. Paul seven-county region uses its tax-sharing authority to reduce the disparity between rich and poor jurisdictions. The revenues for the Council come from all governments placing 40 percent of the growth of their commercial and industrial property tax base into a regional pool, and this amount is then redistributed on a per capita basis.

From the pool, several hundred million dollars a year is redistributed, and in some years, Minneapolis – with a strong downtown and residential areas – is a net contributor to the fund, which focuses on regionwide priorities like public transit and light rail, parkland, water quality and smart growth.

Meanwhile, in Portland, the Metropolitan Regional Government administers programs in a three-county, 24-city region. Born from the region’s environmental ethos, the government today coordinates land use and transportation. However, equally important, it helps to pay for regional services like the convention center, performing arts center, stadium, exposition center and regional parks.

The innovative tax policies of Portland and Minneapolis/St. Paul did not just happen. They both came about because of entrepreneurial leadership by state government, which passed the legislation that allowed this unique approach to regional problem-solving to exist in the first place. But first, state officials need some leadership from here, and it would seem that Shelby County Mayor A C Wharton - as chair of MPO, as head of the Homeland Security region, as the head of the largest regional government and as the untiring proponent of new tax policies - would take up the mantle for a new look at taxes. As we've said before, the energy of the mayor and our community would be better spent restructuring our tax system than chasing new revenues sources such as development fees that are merely band-aids on a system that is bleeding to death.

It’s now been pointed out to state officials that Tennessee has 10 regions. It’s time for their help, and a first step is to give each region the authority to set up a regional tax-sharing system that inspires regional thinking and action. Now, who has the political courage to try to get it on the public agenda?

If I could do anything, I'd break parts of Memphis off. Memphis has overstretched itself.

I've met many people who have moved to Memphis because due to their jobs. These people usually live in Memphis, at least at first ... until they figure out that we have clowns in charge.

DeSoto Cty isn't among the counties mentions since it is across state lines but DeSoto would affect those numbers significantly ... BTW, I would lump Haywood with Madison Cty rather Shelby. The people I knew in Haywood tended to go Jackson rather than Memphis.

Back to DeSoto Cty ... the thing that is missing from the numbers is the fact that many of our higher paid people AND jobs are moving into Mississippi.

When will you understand that it is a corrupt mayor, an inept city council, a lousy school system, high crime, high taxes, etc. that are driving people to flee Memphis???

The businesses and malls are following the people and the money. Don't blame Collierville for the fact there is a mall there. Besides, as long as the people of Collierville are using the new mall, they aren't clogging the roads into Memphis or using our streets or even polluting our air ... one would think that would make you happy!

If you want a strong urban center, then you need competent leaders. Something that is definitely lacking in Memphis.

Do you really expect people to want to turn their money over to the clowns who are running Memphis?

I think you make some a good argument for a regional taxing authority, but there is one reason that it will never happen: race. The white people that moved to Desoto and Fayette counties because they didn't want their child in a school that was > 70% black would never tolerate their tax dollars being handled in Memphis. Right or wrong, they view the black leadership in Memphis as inept and corrupt and would never surrender their dollars to that leadership. Like the vast majority of people on the planet, they have more trust for people that look like themselves than people of different colors. They live where they live because they wanted to get away from leaders that don't trust and view as incompetent. Sad but true.

That's an apt comparison, the Soviet Union and metropolitan government. Yes they are both so similar...except for the multiple party-multiple view elections, capitalistic dominated economy, freedom of movement...wait, that doesn't make much sense after all. Census data shows that many of our higher paid citizens and jobs are NOT moving to DeSoto Co. That is just flat wrong. Census data does show that our little metro area is like a micro-universe in that the middle class is being squeezed out of existence, or in our case, is winding up in Mississippi. DeSoto Co. is vastly dominated by the middle class. If current U.S. and global economic trends hold true, this will prove to be a poor and short sighted investment by DeSoto Co. as the middle class continues to stagnate or shrink.As far as leadership, this is just an easy target to point ones finger at. If Washington himself were named mayor of Memphis and the founding fathers the city council, the same individuals wailing now, would continue to cry out either over the new mayor or a totally different set of issues. Leadership is important, but the basic issue involves these individuals. No allocation of money to schools, parks, police, roads, or free apple pie (mmmm...pie) will ever satisfy these individuals.

The point made, and a sound one at that, is society continues to evolve. As has been the case for a millennia, our cities and towns reflect our changing ideals, goals, and values. However, changes that have occurred since the industrial revolution have reinvented our urban centers several times over to a vast degree. This requires a continuous process of analyzing and adjusting the form of government used to represent these new urban conurbations ("London, 2000"). Speaking of London, that urban center has expanded its municipal authority to encompass its surrounding suburban areas several times which has resulted in the Greater London and London Region that we are familiar with today. It is overly simplistic to expect a government, its organization, funding, and methods of representation to remain static while its purpose and role are expected to meet the needs of its citizenry. To suggest fragmenting our cities is akin to the "back to the farm" movement at the turn of the century. It is fitting in this case seeing as this desire helped spur such "bucolic" settings as DeSoto Co. where the primary cash crop is mass produced, questionable quality, suburban housing. Just look at what is now considered base level civic benefits. Garbage disposal, fire protection, and even street paving have not always been the responsibility of the civic government. However, the need was ever-present and civic authorities evolved to assume these duties. Now we see a growing number of municipalities that have incorporated wireless internet infrastructure into this fulfillment of basic needs. Our urban governments must evolve just as the needs of the citizens evolve. The issue is that urban areas are no longer single points completely contained within one county that provide services enjoyed by a very local population. The division between urban and rural, especially in the economic and social realm, is becoming increasingly blurred if not erased completely. Why is it so hard to imagine a government evolving to meet the modern role demanded of a city.

Side note: I agree with a previous post in that a deep ethnic bias toward government representation remains in our area and will continue to hinder our development in the coming decades. While other southern cities have or continue to face the same issue, our more successful peers have apparently reached an acceptable compromise or understanding. Interestingly enough, it can be assumed such an understanding would aid in a regions ability to attract economic development- result in an influx of immigrants to the region- thus diluting the established population and any entrenched ethnic bias.

Good points made here. At least on SCM's blog, not necessarily on the right wing commentary.

I agree that we are all in this boat together and there should be some kind of metropolitan taxing authority versus the the antiquated structure we now have. I do have to agree that it is a very low chance of this happening anytime soon. Race is definitely one reason. Until there is a large african-american presence in Desoto County (it is coming), then they will be happy to have their cake and eat it too. The same is true of the other suburbs. Unfortunately a payroll tax or the threat of one is the best way to induce the burbs to look at this in the near future.

I would challenge SCM to look at more comparable cities for examples. Minneapolis and Portland are not really like us at all.

LOL --- Right Wing? Actually, I'm a libertarian. I believe that the individual comes before the state (or the community for that matter). I believe the smaller and closer the gov't is to the people the better.

I will continue to do battle with new urban elitist who want to force people into their idea of Utopia.

I will especially oppose the elitist ideas of punishing those who dare to vote with their feet and leave by imposing an oppressive payroll/income tax.

I guess one needs to define "higher paid people". I would think that anyone above the median income would be considered "higher paid" since they are higher than the median.

I can confidently say that those I know who have moved to DeSoto County or Tipton County or Fayette County all make a minimum of $45k. In fact, the median income of DeSoto County in 2000 was $48k (vs $39.6 for Shelby County). So in my view, the higher paid people are moving to DeSoto County.

As for jobs, DeSoto County job growth in 2001 was 3.9%, 2002 - 2.0%, 2003 - 5.6%! In contrast, Shelby county LOST 1.1%, 1.3%, 0.5% in the same three years. So, let's see ... DeSoto County gains while Memphis losses ... I would say that some jobs moved and some jobs went to DeSoto County that in prior years would have come to Memphis.

Thus, I restate ... both higher paid people and jobs are moving to DeSoto County.

Jobs are dispersing out from the urban core. UP moved from downtown to Goodlett Farms. FedEx is out on Hacks Cross and out in Collierville.

If Memphis wishes to stop the bleeding, it needs competent leadership rather than the corrupt ego-maniacs in charge now.

Memphis is its own worse enemy. Annexations and talk of payroll/income taxes aren't helping.

And I would advocate that in any regionwide, payroll/income tax scheme that all who pay the tax, get a vote in municipal elections.

LOL. I'm libertarian as well. In discussions like this, we are seemingly indistinguishable from Republicans.

I must take severe exception to turnerarch's contention that we have a "multiple party" system here. We have a pack of jackals with differently colored pelts, but they all feed off the corpse of Memphis. They just bicker and pick off each other to get at the choice parts, like Juvenile Court Clerk, County Commission, etc. They aren't different, in that they want real structural change in Memphis; they just want control of the money flow in their hands.

One part of the reason for the expansion eastward is that large parcels of land are easy to put together. Not so in Midtown, Downtown or Memphis in general. And the large parcels that *are* put together are often very expensive due to location to other amenities or to roads / interstates. And then there are the parcels that can be put together, but are in locations no one wants (Lamar and I-240).

For example, I'm glad we have a Home Depot in Midtown now. But it took the demise of Mega-Market and some creative thinking to get it. Not everyone has access to Mayor Herenton and can convince him to make public land like housing projects available to them for redevelopment. I'm leery of giving the City more room for eminent domain use to assemble parcels because they seem to invevitably give away the store, like with the FedUp Forum.

Expanding out problems out to others isn't the answers. Fixing them first is what's called for.

I love the idea of restructuring the tax system rather than searching for something new. This idea should be appeasing to anyone who works in Memphis and at the end of the day haul a$$ across the county line (estimated at 88,000)without contributing anything back to the growth and development of the city. This plan would justifiably reduce resentment from Memphians who work here, pay taxes here, shop here, send their kids to schools here, toward those who in our opinion bleed the city and then run. If we partner with Mississippi, Arkansas, Fayette, and Tipton Counties on some sort or tax revenue sharing, our entire region wins. I'm open to any reform that relieves the tax-burden on Memphians. I'm all for it.